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Monday, 7 September 2009

The dust of riba: and the rush for gold

The Arabic word riba literally means “increase.” Generally we understand it to mean, “usury” or “interest.” In exchange for the privilege of a loan the borrower pays the lender an additional percentage of the loan’s sum. Shariah defines numerous other forms of riba, but this is the most common form in the modern world. Historically money lending of this type was forbidden in all prophetic traditions.

The earliest prohibitions of usury come from 4,000-year-old Vedic texts, the oldest religious manuscripts of Hinduism. In the Jatakas Tales of Buddhism, roughly 2,500 years old, usurious lenders are referred to as “hypocritical ascetics” (1). The Torah refers to usury as neshekh, meaning “a bite” and avak ribbit, literally “the dust of interest” (1). Sound familiar? Numerous warnings throughout the Bible guided Jews and Christians of the past to acknowledge the inherent injustice of such transactions. Deuteronomy 23:20 reads, “You shall not demand interest from your countrymen on a loan of money or of food or of anything else on which interest is usually demanded.” In the middle ages the Catholic Church interpreted passages like this as a strict prohibition against charging interest on any loan. It was the teaching of Thomas Aquinas that the purpose of money was to serve the greater good of the people by facilitating the exchange of goods needed to live a pious life. Adherents of all these faiths once recognized that such an economic system funneled wealth out of the hands of the borrowing class, into the hands of the lending class, further separating the rich and poor. In the modern world it is Muslim scholars who preach the dangers of interest. Just as Thomas Aquinas, and Aristotle before him, they teach the inherent oppression of usurious transactions, and they teach the use of money to promote the general welfare, to establish economic justice, and to facilitate as a medium of voluntary exchange and charity.

So… what is money? If you search Google for a definition of “dollar” the first result will be, “the basic monetary unit equal to 100 cents.” Which begs the question... what is a cent? to which you’ll receive the result, “a fractional monetary unit worth one-hundredth of the value of the basic unit.” It’s circular! Inshaallah, I will endeavor to illuminate the process by which the U.S. dollar comes into being, to show that the monetary system in the U.S. is built upon a hidden usury known as inflation, to argue that this inflation is predicted in the Hadith, and to propose some common sense solutions to the economic injustice inherent to the U.S. monetary system both from the Sunnah and from the U.S. Constitution.

In 1913 the U.S. Congress passed the Federal Reserve Act granting monopoly power to print money to the Federal Reserve System. The concept of the Federal Reserve System was actually not devised by the US Congress, but by a group of International Bankers who met in secret on an island off the coast of Georgia (2). The first fraud perpetuated by this system is the name itself. The Federal Reserve System is not federal. It’s owned by private shareholders, motivated by private profits. To prove this look to your phone book, where you will find the Federal Reserve in the business listings right next to Federal Express. The Federal Reserve System is not a reserve. There is no gold. There is no silver. They print a baseless paper note. Its only value is derived from public confidence in the U.S. government… which is declining. The Federal Reserve System is not a system. It is a central bank, which was bitterly apposed by the drafters of the constitution. The founders recognized the importance of honesty currency. They understood inflation, which is why they wrote in the constitution, “No State shall… make any Thing but gold and silver Coin a Tender in Payment of Debts.” (3)

So, why perpetuate this fraud? How does Congress benefit? The answer is limitless credit. The Federal Reserve gives Congress the ability to borrow money to fund their projects without directly taxing their subjects. But where does the money come from? It simply springs into being the moment they sign the loan. Unable to fund its devastatingly expensive wars throughout the world, the US government has abandoned the stability of a gold standard and embraced a fraudulent system of fiat currency. Fiat currency is paper printed by The Fed and borrowed by the government. The dollar is not backed by any commodity. It derives its value from legal tender laws that obligate subjects to use the dollar. Ironically, the dollar itself behaves like a commodity in the market, and like all commodities it becomes subject the market pressures of supply and demand…

Here’s the dust.

When the government borrows money from The Fed (with interest of course) they circulate an ever increasing amount of paper notes into the economy. Increased supply means decreased demand. The more they print, the less value the money already in the system holds. This is the cause of inflation. Most people incorrectly believe that inflation is the rising cost of products, but this is only the result. Inflation is actually the lowering buying power of the dollar. When the Fed prints money to pay for the government’s war spending the buying power of that new money is stolen from the buying power of the dollar in your pocket… it’s an invisible interest that is built into the U.S. monetary system. The Fed then obfuscates this by manipulating the interest rates on loans and savings accounts. So, while the dollar amount in a savings account may increase by interest, the actual value is decreased by inflation. Since the inception of The Fed the buying power of the U.S. dollar has dropped 96%. So today’s dollar is worth only 4 cents compared to the gold dollar of 1913. Soon it will not be worth the paper it’s printed on, and this country will enter into the same economic recession that toppled the Soviet Union. Fiat currency is a fraud. Like all forms of usury it funnels money out of the hands of the borrower, the government and by proxy the American people, and into the hands of the lender, the Fed and therefore the International Bankers.

The prophet Muhammad (peace by upon him) predicted this economic catastrophe when he said that one of the signs of the approach of the Hour is that wealth will increase to such an extent that one will not be satisfied if given one hundred dinars (4). Shariah defines a dinar as 4.25grams of 22k gold. In today’s gold market where gold just passed $1000 per oz. that’s a value of about $136. One hundred gold Dinars in today’s market would hold the purchasing power of about $13,600 (425g of gold). Let’s compare that with the purchasing power of the dinar in the time of the prophet(saw). One Hadith describes the prophet(saw) purchasing an old camel for 4 dinars (5). In U.S. dollars that’s $544. Another Hadith describes a gold and pearl necklace purchased for seven or nine dinars (6). In today’s market that’s $952 or $1,224. A similar Hadith is narrated of a gold necklace studded with gems beings sold for 12 dinars (7), which is $1632. These are not unreasonable prices in today’s market. The purchasing power of gold has remained relatively stable for 1400 years, and throughout history. It’s the value of the dollar, and fiat currencies like it, that fluctuates and declines. Today most Muslim majority countries have abandoned the gold dinar and instead based their currency on the U.S. dollar. Today 100 Kuwaiti dinars hold the purchasing power of $366 (11.4g of gold). 100 Libyan dinars hold the purchasing power of $84 (2.6g of gold). 100 Iraqi dinars hold the purchasing power of just 8 cents (.002g of gold). (8) If you take this Hadith to mean 100 gold dinars the value has not changed. 425 grams of 22k gold is still 425 grams of 22k gold. But if you take it to mean 100 of the fiat dinars printed in any Muslim majority country it has already come to pass. So, while the Kuwaiti dinar can boast that it is the highest valued monetary unit in the world (9), is worth only 3% of the value of the gold dinar prescribed by Shariah. This is because printing fiat money debases a currency, harms the economy, funnels wealth into the hands of the rich, and levies an invisible usury against the poor.

The solution to this looming economic crisis is obvious. Return to the Sunnah. Invest in gold and silver. Exchange in gold and silver. This is surprisingly easier than it sounds. Gold is becoming increasingly more accessible and more liquid in U.S. markets through websites like kitco.com. Websites such as e-dinar.com deal in precious metal accounts and sell dinars and dirhams in the measurements of the Sunnah.

Imagine this scenario. Say you own a grocery and a customer comes in to purchase a loaf of bread costing $1.50. In exchange he offers you a choice. You can either accept 6 quarters, composed of 92% copper and 8% nickel, or 1 Islamic Dirham of equal value, composed of pure silver. Which would you take? The wise grocer would take the silver, and here’s why. If you hold the 6 quarters and the one dirham in a safe for 30 years the dirham will still buy a loaf of bread, and the quarters will likely not buy a slice of bread. Precious metals are inflation proof because they hold intrinsic value. Their value may fluctuate with the market, but they can not be devalued by the actions of Congress and the Fed. If that’s not enough of an incentive consider this. If you take the quarters you have made a sale. On that sale the government collects a sales tax from the buyer and an income tax on the seller. If you take the dirham you have not made a sale. You’ve traded two commodities of equal value, with no U.S. dollars exchanged. Using gold and silver as a medium of exchange keeps a community’s wealth in the community. Imagine the baraka in conducting your transactions, paying your zakat and sadaqa, or even giving a marriage gift in the denominations of the Sunnah.

The first and most important step is something you can do right where you’re sitting now. Make the intention. In your heart believe that gold and silver are real money, and that fiat money is a userous fraud. The next step is to educate yourself and other Muslims around you about these important subjects. Share this information with others. Copy it and distribute it. Locate and read The Gold Dinar and Silver Dirham: Islam and the Future of Money by Imran N. Hosein (10). Copy it and distribute it. It’s time that Muslims took steps toward protecting economic justice, both for themselves, and the society they live in. A basic economic principle is that good money exposes bad money. It’s time to revive this long lost Sunnah.